Ginger, Doorbot and the elusiveness of innovation
“It’s like putting wheels on your feet,” is how Doug Field, then Director of Engineering at DEKA Research & Development, described the company’s latest innovation, a secret project to develop a revolutionary transportation device they
“It’s going to change the world,” said Dean Kamen, DEKA’s founder and owner.
Coming from someone with Kamen’s reputation, one of the world’s greatest innovators of all time, that claim meant serious business. In fact, calling Kamen an inventor is a major downgrade and a plain offense.
Dean Kamen has some innovation marvels under his belt including the first portable dialysis machine, the first portable insulin pump, the first drug infusion pump and the first all-terrain wheelchair known as the iBOT.
Winner of the National Medal of Technology, Kamen is also a member of the National Inventors Hall of Fame and the National Academy of Engineering, received honorary Doctor of Engineering degrees from the Rensselaer Polytechnic Institute and Kettering University, and honorary Doctor of Science degrees from Clarkson University and the University of Arizona.
He has also received honorific doctorates from the Wentworth Institute of Technology, North Carolina State University, Bates College, the Georgia Institute of Technology, the Illinois Institute of Technology, Plymouth State University and Yale University.
Yet according to Kamen, Ginger was his most ambitious project ever: a revolutionary self-balancing human transporter that promised to change how people moved around forever.
Afraid of imitation from Asian companies, he kept it under wraps in high secrecy, and only showed it to very select people who first had to sign a long confidentiality and non-competition agreement.
The device was a bimotor scooter, balanced by a moving body weight on two parallel wheels controlled by a gyroscopic stabilization system.
Its use was very simple: riders would just need to balance their weight in the direction they wanted to go, and the device would take them there.
It was a remarkable piece of mechanical engineering, powered by a cluster of ten modern microprocessors each making hundreds of calculations every second.
It packed the computational power of three personal computers into a very light frame.
All the hoops and behind-the-scenes talk were well justified according to Kamen, since his new device would change everything we knew about mobility. In his own words:
“I would stake my reputation, my money and my time on the fact that 10 years from now, this will be the way many people in many places get around… If all we end up with are a few billion-dollar niche markets, that would be a disappointment. It’s not like our goal was just to put the golf-cart industry out of business…” and “[Ginger] would prove so wildly popular that they would quickly fill the pavements of congested cities.”
According to Kamen, it was how people would move in the future, a story so compelling that he was in talks with Hollywood director Steven Spielberg to feature Ginger as the main means of transportation is his upcoming movie Minority Report, a science-fiction film set in year 2054 starring Hollywood superstar Tom Cruise.
But don’t just take Kamen’s own words for it. The project had gotten the blessings (and money) of renowned high-tech investors like Steve Jobs and Jeff Bezos, and top venture-capital powerhouses like Kleiner Perkins Caufield & Byers led by superstar venture capital investor John Doerr who backed Netscape and Amazon.com in their early days.
They were all fighting to get a piece of the project that took Kamen ten years of hard work and more than $100 million to develop.
But that investment was just pennies compared with the value the device was expected to create for its shareholders. One of the early estimates projected demand at 40,000 units per month after only the first year, and a total of 22 million units sold by year 10.
They would be shipping around 2,000 units a day, the estimates went, and the supplier of the electric motors would have to build an entirely new factory to cope with demand.
Ginger would be profitable within the first year of production based on their numbers, putting a $26 billion valuation tag on the company by year five and $73 billion by year ten.
But by 2003, two years after its launch, the Segway, the official name under which Kamen’s invention was promoted, had only sold around 5,000 units. It took DEKA eight years, until 2009, to launch its 50,000th unit, falling way short of its estimates.
The device was widely ridiculed in the media, with some calling it a gimmick and even a “cosmic fart”.
But what went wrong?
How come all these tech heavy hitters got it so wrong and invested so much in a flawed product?
Is it possible that these tech titans fell so much in love with the technology powering the Segway that they didn’t pay attention to the business aspects of it?
Could a more business-oriented (and less techy) investor have predicted that it wouldn’t work?
To answer that, let’s see what happened with another potential breakthrough product: Jamie Siminoff’s Doorbot.
As Jamie was getting ready for his pitch to CNBC show Shark Tank in 2013, his hands were shaking and sweaty.
He had spent weeks and over $10,000 building props for the show, money and time that his bootstrapped startup didn’t have. But he knew this was his shot at finally getting the investors he needed to take his company, Doorbot, through the safe line.
He practiced his opening pitch more than a hundred times: “Next time your doorbell rings, wouldn’t it be nice if you could look at your smartphone and see who’s there?” as a picture of his camera-enabled doorbell ring would be shown on a big screen for the “sharks”.
Doorbot allowed users to see who was at the door from any smart device and enabled two-way communication with visitors. “It’s like a caller ID for your doorbell” said Jamie. “When someone rings the Doorbot, you can see them and decline if its someone you don’t want to talk to… just like a regular call.” The sharks laughed.
He was seeking a $700,000 investment for 10 percent of his company, a $7 million valuation. His total sales at the time were one million, of which $250,000 had been made in the previous quarter. The product sold at $199 online, and cost $81.83 to make, a 41 percent markup.
In one of the quickest turnarounds of the show, Doorbot was rejected by every single shark. Tech guru and investor Mark Cuban declined to invest saying he “couldn’t see the progression to become an $80 million company”.
Online security expert Robert Herjavec said, “It is a consumer device, but you’re pricing it at $199, and that price is going to start dropping quickly as your volumes go up”.
Jamie left Shark Tank without a deal. He was devastated and so worried that the eight-person company operating out of his garage would fail that he cried after he left.
Looking back, Jamie says “I will never forget leaving the set without a deal. It was horrible. I could not believe that we had done all of that work and were walking away with nothing. Sure I thought if we aired (the episode has a lower chance of airing without a deal) that we would get a little bit of traction, but I did not think it would be enough to make a real difference for us”.
Fast forward five years to
The company now offered a full suite of security products and counted billionaire Richard Branson among its investors.
The $700,000 investment that Jamie was asking for in 2013 would have been worth $100 million by the time it sold to Amazon, a 14,000 percent increase!
Except for Cuban, the sharks were not tech geeks like Kamen, Jobs, Bezos
With both Segway and Doorbot the product was no less than outstanding. Dean Kamen was awarded the Lemelson-MIT Prize for his invention of the Segway, and not even the sharks could deny the novelty in Doorbot. “I like the product” said an excited Mark Cuban in the Shark Tank episode when it aired in 2013.
The thing is, getting innovation right is extremely difficult, and not even the most experienced people can predict with certainty which products will be hits and which ones will flop.
Google Glass, Sony Betamax, New Coke, Apple Newton, Ford’s Edsel model, the Facebook phone, BlackBerry’s PlayBook tablet, HD DVD, McDonald’s Arch Deluxe, Google+, HP’s TouchPad, Windows Vista, Starbucks’ Mazagran soda, Life Savers Soda, Netflix’s Qwikster, Nike’s FuelBand, Ben-Gay’s Aspirin, Donald Trump’s Trump Steaks, the Iridium Satellite Phone, Watermelon Oreos, Cheetos Lip Balm and Colgate’s Kitchen Entrees are just a few of a large list of products that their developers believed could work but didn’t.
The road from idea to market is many times a long one, and even a great product can’t guarantee commercial success since there are many other factors at play that could turn the effort into a failure.
Many executives enjoy having the word innovation in their arsenal and spread it around in earnings calls and press releases, but they sometimes use it in ways that are completely meaningless for shareholders.
In fact, the term innovation has been so abused and overused that it has almost lost its meaning.
Ironically, although it is commonly associated with growth, some research suggests that launching new products is the least successful way to achieve growth with a failure rate that exceeds 80 percent by some accounts.
The truth is that, as a process to bring new products to markets, innovation carries multiple risks.
To start, innovation efforts consume resources that could be otherwise used in other profit-generating activities, for example managing our cash cows.
Second, innovation forces companies to make bets on things that they believe could work like in the case of Segway, but experience shows that in most cases the innovators’ gut is not enough to ensure a product’s success.
Take the race for online music streaming between Pandora, the pioneer of the space, and second movers like Spotify and Apple Music.
Pandora bet on a future where online radio stations would be the norm, therefore it created its platform around music recommendations and the creation of personalized stations based on a few seed songs.
Spotify, on the other hand, made a different bet and gave users full control over what they wanted to listen to, creating personalized playlists and providing a huge music library.
In that case Spotify’s turned out to be the right bet and today its user base is 20 times bigger than Pandora’s.
Looking back, in retrospect many would argue that the right choice was evident and that the loser was dumb, but as a good friend likes to say, “being a historian is way easier than being a prophet”.
To give innovators some credit, it is very hard to predict successful products because the only reference we have when creating new products is existing ones.
The idea of “looking forward” is very difficult when it comes to innovation.
Let us give you an example: if someone had come to you 10 years ago with an offer to invest your retirement money in a new app that would create a “platform to connect private car owners with people in need of a ride, and that the platform will profit from making the connection”, would you have invested in it?
Back then, it was near impossible to predict that something like that could actually become what Uber is today, as it has come to be one of the most successful startups of all time.
Nevertheless, it would have been even more difficult to convince executives in a well- established taxi company to divest money and resources from proven projects into that unproven idea.
They would never have imagined that a simple app that doesn’t own any cars nor hire any drivers could put them out of business.
When an innovative product or service succeeds, as in the case of Uber, it becomes an extraordinary source of growth for a company. But “betting on the right horse” is, whether some like it or not, part expertise, part guts and part plain luck.
However, having a set of guidelines in place to originate and validate product ideas can improve the odds of succeeding and help us get luckier more often.
There are many playbooks out there on creating new products. For some, companies should focus on creating disruptive products that beat incumbents out of the market, while for others it should be more about creating entirely new markets where companies can reap first entrant advantage and enjoy low competition for a while.
For us, it is a simple decision: you need to pursue both, and then some.
You should never fall in the trap of theorizing around innovation frameworks or picking sides.
As long as you can create value and convert a piece of it into profits in a sustainable way, any opportunity is a good one for you.
Wu, Sun. Strategy for Executives, this book can now be downloaded for free here.
Dean Kamen Wikipedia page. URL: https://en.wikipedia.org/wiki/Dean_Kamen
Harris, Tom. How Segways Work. How Stuff Works. URL: https://science.howstuffworks.com/transport/engines-equipment/ginger1.htm
Machine of Dreams (article). Vanity Fair Magazine. May 2002.
Kemper, Steve. Code Name Ginger: The Story Behind Segway and Dean Kamen’s Quest to Invent a New World. Harvard Business Review Press. 2003.
Shark Tank (TV Show). Season 5, Episode 9. ABC Television Network. 2013.
Siminoff, Jamie. 2 Years: An Open Letter to Shark Tank. Ring blog. November 2015. URL: https://blog.ring.com/2015/11/13/sharktank
Montag, Ali. This $1 billion company was once rejected on ‘Shark Tank’—here’s how the founder proved everyone wrong. CNBC. November 2017. URL: https://www.cnbc.com/2017/11/30/shark-tank-reject-doorbot-is-now-billion-dollar-company-ring.html
Christensen, Clayton. The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Management of Innovation and Change). Harvard Business School Press. Kindle Edition.
Wengel, Rob; Hall, Taddy. How to Flip 85% Hits: Lessons from the Nielsen Breakthrough Innovation Project. Nielsen. 2014.